One thing some of the Protestant churches (including ours) have done to encourage singing is to put the lyrics up on a screen using slides or an overhead projector. This gets the folks' heads up out of the song books and lets them see the director at the same time.
Back in another life, I saw the same concept used in banjo bars and piano bars, as well as the drive-in theaters at intermission. Remember "follow the bouncing ball?"
As they used to tell us in Scout leader training, KISMIF. Keep it simple, make it fun.